Short-term cash-flow accounting provides an incentive for lawmakers to overpromise entitlement benefits, and such a method reduces their incentive to undertake short-term sacrifices that would improve the government’s long-run financial position. Complementing existing budget measures with newer measures that include the present value of future cash-flow shortfalls would improve the informational content of the current budget. It would also reveal more accurately the financial burden being placed on future generations.
Long-term present value measures are now included in the Social Security’s and Medicare’s Trustees’ Annual Reports. The president’s 2006 budget also proposes a “point of order” against policies that would increase present value budget shortfalls in the nation’s entitlement programs. Sen. Joseph Lieberman (D-CT) has recently introduced legislation that would expand the scope of these measurements to the entire federal budget.
This conference will discuss the merits of complementing official federal budget reports with long-term present-value measures of federal financial shortfalls, and of anchoring budget process rules to such measures.
Watch the Event in Real Video (1st segment)
Watch the Event in Real Video (2nd segment)
Watch the Event in Real Video (3rd segment)